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Transcript

Daily Market Podcast Oct 12 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:00
  SPEAKER_00: This is Chris Myers with M6 Capital Management with our daily market letter on Monday morning, October 12th.
• 0:06
  SPEAKER_00: Walking in this morning, December corn is up a half at 480.
• 0:11
  SPEAKER_00: November beans are down eight at 1284.
• 0:14
  SPEAKER_00: December meal is down 480.
• 0:17
  SPEAKER_00: And crude November crude oil is up$1.30 at$93.20.
• 0:24
  SPEAKER_00: So the story this morning is basically a continuation of USDA shocking the world on Friday, particularly in corn.
• 0:33
  SPEAKER_00: The USDA reports on Friday they put the U.S.
• 0:37
  SPEAKER_00: corn yield up.
• 0:38
  SPEAKER_00: They raised the corn yield up 2.7 bushels per acre to 181.2.
• 0:44
  SPEAKER_00: USDA also raised the U.S.
• 0:47
  SPEAKER_00: corn innings stocks to 1.85 billion bushels.
• 0:51
  SPEAKER_00: On the bottom of page one, I've got the estimates of uh I've got a chart of U.S.
• 0:58
  SPEAKER_00: um inning stocks in corn and soybeans with USDA's forecast on there that you can see.
• 1:04
  SPEAKER_00: Highly suggests taking a look at those.
• 1:07
  SPEAKER_00: The market was looking for a declining yield and a much smaller ending stocks, and was fearful of it really being something bad.
• 1:17
  SPEAKER_00: Well, there's two facts, two key facts that we can learn from UST reports on Friday.
• 1:24
  SPEAKER_00: Number one, the size of this corn crop and this type of ending stocks means that we do not need to ration demand.
• 1:33
  SPEAKER_00: We have plenty of corn to go around.
• 1:36
  SPEAKER_00: Unless we have some major crop issue in South America, CBOT corn is too high and has a lot of downside to it.
• 1:44
  SPEAKER_00: History would suggest that December, March, and May corn contracts should all trade 75 cents lower than where they are right now.
• 1:58
  SPEAKER_00: So a lot of downside.
• 2:00
  SPEAKER_00: Number two, and this is longer term, genetics in U.S.
• 2:05
  SPEAKER_00: corn yields have come a lot farther than what we realized.
• 2:11
  SPEAKER_00: For example, this summer we did not have good growing weather, particularly in the plain states.
• 2:17
  SPEAKER_00: Yet USDA's yields on Friday did not reflect very much damage.
• 2:23
  SPEAKER_00: Let's look at Nebraska.
• 2:26
  SPEAKER_00: A trend yield in Nebraska if for this year was 190 bushels per acre.
• 2:32
  SPEAKER_00: And their spring and summer was dry and very hot.
• 2:37
  SPEAKER_00: In September, USDA estimated Nebraska's corn yield at 177 bushels, which we thought was okay, and it reflected poor growing conditions.
• 2:50
  SPEAKER_00: But USDA raised the Nebraska corn yield estimate on Friday back up to 188, just barely below a 190 trend.
• 3:02
  SPEAKER_00: So the longer term, the obvious longer term lesson from this is that from now on, we should all remember that corn has been bred to handle hot, dry weather much, much better than it ever has done before.
• 3:19
  SPEAKER_00: So walking in this morning, speculators are still along some 275,000 contracts.
• 3:25
  SPEAKER_00: They got out of some on Friday, but they got a lot more to go.
• 3:29
  SPEAKER_00: And they are now in a get me out mode.
• 3:32
  SPEAKER_00: Rallies in CBOT corn should be sold as long as we have okay weather, okay crops in South America, which we do right now, we should see CBOT corn prices sliding lower and lower.
• 3:45
  SPEAKER_00: Moving on to soybeans, uh, the USD report on Friday also increased the U.S.
• 3:51
  SPEAKER_00: soybean yield 0.3 bushels per acre to 53.1.
• 3:56
  SPEAKER_00: And I've got a chart of that uh along with corn, the ending stocks on the bottom of page one.
• 4:03
  SPEAKER_00: And you can see that USDA's estimate of 315 million bushels is not tight swiveling supplies.
• 4:11
  SPEAKER_00: So, much like corn, unless we have some major crop issue in South America, CBOT soybean prices are too expensive.
• 4:20
  SPEAKER_00: Um, any stocks of 315 million bushels is very similar to the last three years.
• 4:27
  SPEAKER_00: And if you go back and look at Jan and March swimming contracts, this this type of ending stocks suggest that we should be trading below$12.
• 4:38
  SPEAKER_00: That is a full dollar lower than where they're trading right now.
• 4:43
  SPEAKER_00: Meanwhile, harvest is continuing in the United States.
• 4:46
  SPEAKER_00: Crush plants across the corn belt are ramping up, so mills prices should remain on the defensive, remain under pressure.
• 4:54
  SPEAKER_00: Crude oil and diesel prices continue to be knee-jerked around based on war and political mess, such as Trump's proposal to buy diesel from Russia late last week.
• 5:05
  SPEAKER_00: As of this morning, that proposal has heating oil and diesel prices trading lower.
• 5:11
  SPEAKER_00: Who knows what's going to happen there?
• 5:13
  SPEAKER_00: But this mess will keep bean oil prices very erratic.
• 5:17
  SPEAKER_00: I am in the camp that CBOT soybean prices should be trending lower, especially if we continue to have no issues in South America.
• 5:26
  SPEAKER_00: Moving on to weather, um, we've got a system coming up uh Texas, Oklahoma, up into eastern Kansas, uh, Missouri this week.
• 5:38
  SPEAKER_00: And next week looks like it's gonna be wide open uh for harvest.
• 5:42
  SPEAKER_00: So northern corn belt should be just blowing and going as far as harvest press uh harvest progress goes.
• 5:49
  SPEAKER_00: In South America, uh we continue to be wet in the state of Paraná in Brazil and uh isolated areas around Paraná.
• 5:59
  SPEAKER_00: That uh rainfall should end this week and move out into Atlantic and leave us with light scattered rains pretty much everywhere else in Brazil, which means, in the end, means that their corn and bean planting progress should continue at a pretty good pace.
• 6:17
  SPEAKER_00: In Argentina, you've got light scattered rains this week and next, uh, which should be good for corn planting.
• 6:23
  SPEAKER_00: They have not started planting beans yet.
• 6:25
  SPEAKER_00: So, net net, no issues in South America.
• 6:29
  SPEAKER_00: That's it for today.
• 6:30
  SPEAKER_00: Thanks for listening.
• 6:31
  SPEAKER_00: We'll be back tomorrow.